Acknowledging criticism of there being a disconnect between the exuberant stock market and grim economic prospects, capital markets regulator Sebi''s Chairman Ajay Tyagi on Wednesday said there are some positives in the story as well, and termed the recovery since March as "broad-based".
Many market watchers, including RBI Governor Shaktikanta Das, have spoken out about the apparent disconnect between the surging stock prices and the pandemic-hit economy, and diagnosed it to be a result of easy liquidity conditions the world over.
"While one repeatedly hears that the liquidity and low interest rates are the only prime factors driving up the markets, and that there is a disconnect between the market and the real economy, I would like to place before you certain positive aspects of the market recovery," Tyagi told a summit organised by industry lobby CII.
"We have observed that the recovery in the market has been broad-based," he added.
There was a heavy sell-off in the equity markets in the immediate aftermath of COVID-19 being declared a global pandemic by the WHO. However, since then, there has been a steady recovery in the markets, which led many to wonder about the rationale for the same.
Market participants say investors are looking farther into the future beyond current difficulties in taking the bets.
After hitting their lows in March, large and mid-cap indices have increased by around 55 per cent, and the small-cap index has rallied around 70 per cent, Tyagi said, adding that the recovery is broad-based and not led by a few scrips.
Looking beyond the indices, more than 93 per cent of the stocks on NSE and over 75 per cent of the stocks on BSE have yielded positive returns this financial year as on September 30, he said, adding daily cash market turnover has increased 54 per cent to Rs 60,000 crore.
In the April-September period, 63 lakh new demat accounts were opened as against 27.4 lakh in the year-ago period, which is a 130 per cent increase, while foreign portfolio investors'' inflows stood at a net USD 11 billion in the same period even as other emerging markets are in the negative territory.
After the outflows in March, especially in the debt schemes, domestic markets have seen inflows of Rs 1.47 lakh crore in the first half of the fiscal, he said.
Total funds raised by corporates from rights issues, IPOs or follow on public offers stood at Rs 1.54 lakh crore, which is a shade lower than the Rs 1.58 lakh crore in the year-ago period, he said.
Over Rs 3.8 lakh crore has been raised in the debt markets, which is 25 per cent higher than last year, he said.
Sebi's measures during the COVID-19 times have helped the capital markets and the regulator will continue to be vigilant to respond to any rapid movements, Tyagi emphasised.
On concerns being expressed by FPIs on faster settlement of trades to T+1, Tyagi said such a move is in everybody's interest. However, Sebi is yet to finalise its decision and will do so after consultations with all the stakeholders, he added.